Fred Sands, the distressed bond maven? The corporate turnaround master? The vulture after the big vigorish?
For generations, Fred Sands has been known to L.A. real estate and business denizens for his Fred Sands Realtors, the big and successful residential brokerage. Last year his outfit merged with the Coldwell Banker residential brokerage. Though he took a title, Sands has not been hands-on in the combined enterprise.
But Sands, 62, is decidedly not riding off into the sunset. Rather, he has rearmed himself with a $100 million fund and a $200 million line of credit, in search of troubled companies, sickly corporate IOUs or even mezzanine lending situations. His new shop is named Vintage Capital Group.
“We are a private equity firm,” Sands said last week. “We want to buy distressed debt. If necessary, get involved with management in working out the problems. We will convert debt to equity, or even inject new capital, if we like the situation. Right now, we are opportunistic. … We don’t care which industry, so long as it looks like a good deal.”
Sands said the commercial banks are pulling in their horns, and that leaves many good quality companies over-extended, starving for capital. Mezzanine lenders are routinely getting 25 percent annually compounded for their money, noted Sands. “And you can get that yield, while being relatively risk-averse,” he said.
Though Sands has been virtually synonymous with home sales for decades, he pointed out that his background is actually broader than that. He has owned an FM radio station (bought out of bankruptcy), purchased distressed title companies and effected turnarounds. And Vintage Capital is ready to hire the right troops he has two former colleagues with work-out experience, Tom McCormick and Phil McBride, from the old Fred Sands on board already.
Sands pointed out that financier Eli Broad got his start building homes (Kaufman and Broad Inc., now KB Home), but became a major financial player and mezzanine lender through SunAmerica Inc. “Real estate guys deal with troubled financing all the time. It is not such a big leap (to the vulture business) for us,” said Sands.
Icy ICN
The fight over who gets to sit on the 14-member ICN Pharmaceuticals Inc. board heated up a bit last week, with ICN Chairman Milan Panic deciding to file a lawsuit against a slate of three shareholder dissidents seeking seats at the next annual election and vote.
The slate includes well-known Herb Denton, of New York-based Provident Capital Inc., the money management firm that often seek to invest in companies in which it feels it can alter management or policy, and thus improve shareholder results. ICN filed federal suit in the Southern District of New York, charging the trio with violating securities laws by failing to disclose the slate’s “true plan.” He alleged that agenda is not to put watchdogs on the board, but rather “to seize control of ICN without paying a control premium and then to sell ICN for short-term personal profit, thus abandoning ICN’s long-term strategic plan to enhance shareholder value. …”
Panic has his own slate of three up for the open seats at the May 30 annual meeting, including Charles Mannat, the Westside lawyer; Ray Irani, the CEO of Occidental Petroleum Corp.; and Kim Campbell, Canadian consul general in Los Angeles. One insider speculated last week that Panic may plan to postpone the May 30 annual meeting, which has already been rescheduled a few times.
Panic probably talked to a proxy solicitation firm, which polled institutional shareholders, and may have been informed that the dissident slate would in fact win the pending May 30 vote, said the insider.
Panic is now seeking some other result, if not by vote, then in a court of law. Panic or a spokesman could not be reached for comment last week.
Trimmed Down
La Jolla-based Jenny Craig Inc., the fat-fighting house with 650 storefronts, has retained veteran Los Angeles investment banker Stephen Koffler to advise it on strategic alternatives to enhance shareholder value. That could mean merger, sale or joint venture, said Koffler last week.
“What we clearly have is an undervalued situation. The stock market is not going to put a value on the company that it deserves, so it makes sense to look at alternatives,” said Koffler.
In trading last week, Craig was trading in the $1.50-a-share range on the Big Board, for a market capitalization of $32 million. Back in 1997, the company was trading at $17 a share, but it has been plagued by losses and declining revenues since then.
Last year, company founder and chairman Sidney Craig announced a plan to take the company private, but then backed out of the deal as losses ballooned.
Koffler said any number of companies might buy or merge with the company, which sells $350 million worth of Jenny Craig Cuisine meals a year. Food outfits might want to have a look, and more health and fitness clubs are adding diet centers, so one of the national gyms might have a look as well, said Koffler.
“This is a name that 99 percent of people who are on a diet recognize,” said Koffler. “That is a valuable franchise in itself.”
Let’s Talk Stock
For a fleeting few days this week, Los Angeles will be the world hub of Wall Street analysis that’s because the national Association for Investment Management and Research (AIMR) is slated to hold its annual meeting May 21-23 at the Century Plaza Hotel & Spa in Century City. AIMR is the 50,000-member professional association for financial analysts, portfolio managers and other market mavens. It issues the Chartered Financial Analyst (CFA) designation to members who pass all the tests.
Scheduled to lecture at the shindig are management consultant Peter Drucker; investment theorist William F. Sharpe; Jeremy Siegel, co-author of the book “Stocks for the Long Run;” and Ben Stein, comedian, whose topic will be “investment ethics.”
Some topics likely to be treated more seriously include a review of the new Securities and Exchange Commission regulation FD (requiring simultaneous, full disclosure of all material corporate information), tech stock valuation and a seminar on “looking beneath the surface of financial statements.”
Contributing columnist Benjamin Mark Cole writes about the local investment community for the Los Angeles Business Journal. His new book is “The Pied Pipers of Wall Street: How Analysts Sell You Down the River,” published by Bloomberg Press. He can be reached at [email protected].
